_____________________________________________________________________________________________

Page 1

Minutes of the Federal Open Market Committee

October 31–November 1, 2023
A joint meeting of the Federal Open Market Committee Roberto Perli, Manager, System Open Market Account
and the Board of Governors of the Federal Reserve Sys-
Julie Ann Remache, Deputy Manager, System Open
tem was held in the offices of the Board of Governors
Market Account
on Tuesday, October 31, 2023, at 10:00 a.m. and contin-
ued on Wednesday, November 1, 2023, at 9:00 a.m. 1 Stephanie R. Aaronson, Senior Associate Director,
Division of Research and Statistics, Board
Attendance
Jerome H. Powell, Chair Jose Acosta, Senior System Administrator II, Division
John C. Williams, Vice Chair of Information Technology, Board
Michael S. Barr
Alyssa Arute, 3 Manager, Division of Reserve Bank
Michelle W. Bowman
Operations and Payment Systems, Board
Lisa D. Cook
Austan D. Goolsbee Kartik B. Athreya, Executive Vice President, Federal
Patrick Harker Reserve Bank of Richmond
Philip N. Jefferson Penelope A. Beattie, 4 Section Chief, Office of the
Neel Kashkari Secretary, Board
Adriana D. Kugler
Lorie K. Logan David Bowman, Senior Associate Director, Division of
Christopher J. Waller Monetary Affairs, Board
Thomas I. Barkin, Raphael W. Bostic, Mary C. Daly, 2 Yao-Chin Chao, Deputy Associate Secretary, Office of
Loretta J. Mester, and Sushmita Shukla, Alternate the Secretary, Board
Members of the Committee Satyajit Chatterjee, Vice President, Federal Reserve
Susan M. Collins and Jeffrey R. Schmid, Presidents of Bank of Philadelphia
the Federal Reserve Banks of Boston and Kansas Juan C. Climent, Special Adviser to the Board, Division
City, respectively of Board Members, Board
Kathleen O’Neill Paese, Interim President of the Stephanie E. Curcuru, Deputy Director, Division of
Federal Reserve Bank of St. Louis International Finance, Board
Joshua Gallin, Secretary Ryan Decker, Special Adviser to the Board, Division of
Matthew M. Luecke, Deputy Secretary Board Members, Board
Brian J. Bonis, Assistant Secretary
Michelle A. Smith, Assistant Secretary Cynthia L. Doniger, Principal Economist, Division of
Mark E. Van Der Weide, General Counsel Monetary Affairs, Board
Richard Ostrander, Deputy General Counsel Rochelle M. Edge, Deputy Director, Division of
Trevor A. Reeve, Economist Monetary Affairs, Board
Stacey Tevlin, Economist
Beth Anne Wilson, Economist Matthew J. Eichner,3 Director, Division of Reserve
Bank Operations and Payment Systems, Board
Shaghil Ahmed, James A. Clouse, Brian M. Doyle,
Eric C. Engstrom, Associate Director, Division of
Anna Paulson, Andrea Raffo, Chiara Scotti, and
Monetary Affairs, Board
William Wascher, Associate Economists

1 The Federal Open Market Committee is referenced as the 3 Attended through the discussion of developments in finan-
“FOMC” and the “Committee” in these minutes; the Board cial markets and open market operations.
of Governors of the Federal Reserve System is referenced as 4 Attended through the discussion of the economic and fi-

the “Board” in these minutes. nancial situation.

2 Attended Wednesday’s session only.
_____________________________________________________________________________________________
Page 2 Federal Open Market Committee
Jon Faust, Senior Special Adviser to the Chair, Division
of Board Members, Board
Ron Feldman, First Vice President, Federal Reserve
Bank of Minneapolis
Andrew Figura, Associate Director, Division of
Research and Statistics, Board
Glenn Follette, Associate Director, Division of
Research and Statistics, Board
Jenn Gallagher, Assistant to the Board, Division of
Board Members, Board
Michael S. Gibson, Director, Division of Supervision
and Regulation, Board
Christine Graham,4 Special Adviser to the Board,
Division of Board Members, Board
Joseph W. Gruber, Executive Vice President, Federal
Reserve Bank of Kansas City
Michael Hendley,3 Associate Director, Federal Reserve
Bank of New York
Valerie S. Hinojosa, Section Chief, Division of
Monetary Affairs, Board
Matteo Iacoviello, Senior Associate Director, Division
of International Finance, Board
Jane E. Ihrig, Special Adviser to the Board, Division of
Board Members, Board
Michael T. Kiley, Deputy Director, Division of
Financial Stability, Board
Don H. Kim, Senior Adviser, Division of Monetary
Affairs, Board
Christopher Kurz, Assistant Director and Chief,
Division of Research and Statistics, Board
Sylvain Leduc, Director of Research, Federal Reserve
Bank of San Francisco
Andreas Lehnert, Director, Division of Financial
Stability, Board
Kurt F. Lewis, Special Adviser to the Chair, Division of
Board Members, Board
Laura Lipscomb, Special Adviser to the Board,
Division of Board Members, Board
Joshua Louria, Group Manager, Division of Monetary
Affairs, Board
Andrew Meldrum, Assistant Director, Division of
Monetary Affairs, Board
Kenneth C. Montgomery, First Vice President, Federal
Reserve Bank of Boston
Norman J. Morin, Deputy Associate Director, Division
of Research and Statistics, Board
Michelle M. Neal, Head of Markets, Federal Reserve
Bank of New York
Fernanda Nechio, Vice President, Federal Reserve
Bank of San Francisco
Matthias Paustian, Assistant Director, Division of
Research and Statistics, Board
Argia Sbordone, Research Department Head, Federal
Reserve Bank of New York
Nitish Ranjan Sinha, Special Adviser to the Board,
Division of Board Members, Board
Ellis W. Tallman, Executive Vice President, Federal
Reserve Bank of Cleveland
Robert J. Tetlow, Senior Adviser, Division of Monetary
Affairs, Board
Skander Van den Heuvel, Associate Director, Division
of Financial Stability, Board
Francisco Vazquez-Grande, Group Manager, Division
of Monetary Affairs, Board
Clara Vega, Special Adviser to the Board, Division of
Board Members, Board
David C. Wheelock, Senior Vice President, Federal
Reserve Bank of St. Louis
Randall A. Williams, Group Manager, Division of
Monetary Affairs, Board
Jonathan Willis, Vice President, Federal Reserve Bank
of Atlanta
Paul R. Wood, Special Adviser to the Board, Division
of Board Members, Board
Egon Zakrajsek, Executive Vice President, Federal
Reserve Bank of Boston
Rebecca Zarutskie, Special Adviser to the Board,
Division of Board Members, Board
Andrei Zlate, Group Manager, Division of Monetary
Affairs, Board
Developments in Financial Markets and Open
Market Operations
The manager turned first to a review of developments in
financial markets over the intermeeting period. Finan-
cial conditions continued to tighten, driven by higher
_____________________________________________________________________________________________
Minutes of the Meeting of October 31–November 1, 2023
yields on Treasury securities as well as by lower equity
prices and a stronger dollar, which themselves partly re-
flected higher interest rates. Because earnings expecta-
tions had held up well in recent months, the effect of
higher interest rates on equity prices likely took place
largely through valuations.
The rise since July in yields on longer-dated nominal
Treasury securities was mostly attributable to increases
in real yields. There were small increases in inflation
compensation, but the levels of spot and forward rates
were within historical ranges. The manager also noted
that survey measures pointed to generally stable inflation
expectations, especially at longer horizons, and that in-
flation expectations remained well anchored.
Staff analysis and responses from the Open Market
Desk’s Survey of Primary Dealers and Survey of Market
Participants suggested that the bulk of the increase since
July in the 10-year nominal Treasury yield could be at-
tributed to a higher term premium, though higher policy
expectations at longer horizons could also have played a
role. The manager also noted that liquidity conditions in
the Treasury market had not changed materially since
July, suggesting that Treasury market liquidity had not
been an important driver of the increase in yields.
The manager turned next to expectations for monetary
policy. Both market pricing and responses to the Desk’s
surveys implied that market participants expected that
the federal funds rate was at or near its peak and would
be held there at least until the June 2024 FOMC meeting;
there was a roughly 30 percent probability of a 25 basis
point increase at either the December or January FOMC
meeting. Regarding balance sheet policy, the surveys
showed that respondents had pushed out the date they
expected balance sheet runoff to stop, perhaps partly in
response to policymakers’ communications that balance
sheet runoff could continue even after the Committee
begins to reduce the target range for the federal funds
rate.
The manager then turned to developments in money
markets and Desk operations. Balance sheet runoff con-
tinued to proceed smoothly over the intermeeting period
through reduced holdings of Treasury securities, agency
debt, and agency mortgage-backed securities. The con-
tinued repayment by the Federal Deposit Insurance Cor-
poration of discount window loans extended to banks
that were placed into receivership also contributed to re-
duced Federal Reserve assets. On the liabilities side of
the balance sheet, usage of the overnight reverse repur-
chase agreement (ON RRP) facility declined further, as
money market mutual funds continued to absorb new
Page 3
Treasury bill issuance and appeared to increase invest-
ment in the private market for repurchase agreements
(repos) as well. Overall, the reduced usage of the
ON RRP facility released more reserves than the reduc-
tion in Federal Reserve assets and the increase in the
Treasury General Account absorbed. On net, reserves
expanded over the period, and available indicators
pointed to them remaining abundant. Primary dealers
indicated that reserves were projected to remain within
their recent range for the next several quarters. The
manager also noted that 23 banks, in addition to all pri-
mary dealers, were already counterparties to the standing
repo facility (SRF) and that several more were in the
onboarding process. Together, these banks held the vast
majority of SRF-eligible securities in the banking system.
The SRF, in addition to the discount window, may there-
fore prove helpful for supplying liquidity to the banking
system should funding pressures emerge.
By unanimous vote, the Committee ratified the Desk’s
domestic transactions over the intermeeting period.
There were no intervention operations in foreign curren-
cies for the System’s account during the intermeeting pe-
riod.
Staff Review of the Economic Situation
The data available at the time of the October 31–No-
vember 1 meeting indicated that U.S. real gross domestic
product (GDP) had expanded at a strong pace in the
third quarter. Labor market conditions remained tight,
with continued strong job gains and a low unemploy-
ment rate. Consumer price inflation remained elevated.
Labor demand and supply were slowly moving into bet-
ter alignment. Easing labor market imbalances were ap-
parent in the wage data, with the 12-month changes in
average hourly earnings and the employment cost index
each below their year-earlier levels. Although total non-
farm payroll employment rose at a faster pace in Sep-
tember than in previous months, the unemployment rate
was unchanged at 3.8 percent; the labor force participa-
tion rate and the employment-to-population ratio were
also unchanged in September. The unemployment rate
for African Americans rose, while the jobless rate for
Hispanics declined; both rates were higher than the na-
tional average.
Consumer price inflation remained elevated but contin-
ued to show signs of slowing. The price index for total
personal consumption expenditures (PCE) increased
3.4 percent over the 12 months ending in September,
while core PCE price inflation, which excludes changes
in energy prices and many consumer food prices, was
3.7 percent over the same period; both total and core
_____________________________________________________________________________________________
Page 4 Federal Open Market Committee
PCE price inflation were well below their year-earlier
levels. The trimmed mean measure of 12-month PCE
price inflation constructed by the Federal Reserve Bank
of Dallas was 3.8 percent in September, also down from
the level posted a year ago. Survey measures of consum-
ers’ short-run inflation expectations remained above
their pre-pandemic levels. In contrast, survey measures
of medium- to longer-term inflation expectations re-
mained in the range seen in the decade before the pan-
demic.
According to the advance estimate, real GDP posted a
strong gain in the third quarter. Private domestic final
purchases, which includes PCE and private fixed invest-
ment and often provides a better signal than GDP of
underlying economic momentum, posted a smaller but
still-solid increase.
Real exports and imports of goods and services grew at
a robust pace in the third quarter after falling sharply in
the second quarter, reflecting broad-based strength
across categories. Net exports made a slightly negative
contribution to U.S. GDP growth in the third quarter,
while the nominal trade deficit narrowed somewhat.
Foreign economic growth remained subdued in the third
quarter. Monetary policy restraint weighed on activity
abroad, especially in Europe, where euro-area GDP
growth registered a small decline and the latest Euro-
pean Central Bank lending survey pointed to a contrac-
tion in credit from a year ago. Although GDP growth
in China improved in the third quarter, supported by an
increase in industrial production, Chinese retail sales
continued to be held back by low consumer confidence
and weakness in the residential property sector.
Inflation abroad remained elevated. While core inflation
continued to ease amid slowing aggregate demand, en-
ergy price inflation increased in many foreign econo-
mies. With inflation still high, most major foreign cen-
tral banks, while keeping their policy rates unchanged,
indicated their intentions to hold these rates at suffi-
ciently restrictive levels to bring inflation back to target
rates.
Staff Review of the Financial Situation
Over the intermeeting period, longer-term Treasury
yields rose notably, while shorter-term yields were little
changed, and the market-implied path for the federal
funds rate through 2024 declined slightly. The increase
in longer-term Treasury yields appeared to be mostly at-
tributable to higher term premiums, as stronger-than-ex-
pected economic data seemed to increase the uncertainty
regarding how long policy rates might need to remain
high. Meanwhile, equity prices decreased, and spreads
on investment- and speculative-grade corporate bonds
widened. Financing conditions tightened further, and
borrowing costs continued to rise.
The market-implied path for the federal funds rate
through 2024 declined slightly over the intermeeting pe-
riod. Beyond 2024, the policy rate path implied by over-
night index swap quotes increased, likely reflecting, in
part, higher term premiums. The rise in longer-term
nominal Treasury yields was driven by real yields. Short-
term inflation compensation fluctuated notably over the
intermeeting period, largely following the changes in en-
ergy prices, but ended the period modestly lower.
Broad stock price indexes declined over the intermeeting
period. Equity prices in interest rate–sensitive sectors,
such as real estate and utilities, underperformed the
broader market. Stock prices of banks also declined
more than broader equity indexes. The one-month op-
tion-implied volatility on the S&P 500 index increased
notably over the intermeeting period but remained be-
low the peaks observed in the first quarter of 2023.
Over the intermeeting period, foreign asset prices were
largely driven by spillovers from the rise in longer-term
U.S. Treasury yields. Longer-term sovereign bond yields
for advanced foreign economies rose, foreign equity
prices declined, foreign credit spreads generally widened,
and investors continued to withdraw from emerging
market economy funds. Stronger-than-expected U.S.
data on economic activity and widening interest rate dif-
ferentials between the U.S. and the rest of the world con-
tributed to an increase in the staff’s broad dollar index.
The Bank of Japan increased the flexibility of its yield
curve control framework, which contributed to the rise
in longer-term Japanese government bond yields. The
armed conflict between Israel and Hamas left a limited
net imprint on foreign financial markets over this period.
Conditions in short-term funding markets remained sta-
ble over the intermeeting period. Take-up in the
ON RRP facility continued to decline over the period.
That decline primarily reflected money market funds re-
ducing their usage of the facility and increasing their
holdings of Treasury bills and private market repos in
response to slightly more attractive rates on these alter-
native investments. Banks’ total deposit levels were
roughly unchanged over the intermeeting period, as out-
flows of core deposits were about offset by inflows of
large time deposits, which tend to be more expensive
sources of funding. Wholesale borrowing by large banks
increased over the intermeeting period.
_____________________________________________________________________________________________
Minutes of the Meeting of October 31–November 1, 2023
In domestic credit markets, borrowing costs for busi-
nesses, households, and municipalities continued to rise
from already elevated levels over the intermeeting pe-
riod, primarily reflecting increases in longer-term Treas-
ury yields. Interest rates on commercial and industrial
(C&I) loans and small business loans increased, as did
rates on loans to households, including for 30-year con-
forming residential mortgages, new auto loans, and
credit cards. Rates also moved up on a broad array of
fixed-income securities, including residential and com-
mercial mortgage-backed securities, municipal bonds,
and corporate bonds. Yields on corporate bonds rose
more than Treasury yields, particularly for speculative-
grade bonds.
Credit continued to be generally available to businesses,
households, and municipalities. Total core loans on
banks’ books continued to increase in the third quarter,
although at a slower pace than earlier in the year. How-
ever, smaller firms were finding it harder to obtain credit,
with the share of small firms reporting in September that
it was more difficult to obtain credit compared with
three months earlier rising from an already elevated level.
Capital market financing continued to be available, al-
though issuance in most markets was below typical lev-
els.
In the October Senior Loan Officer Opinion Survey on
Bank Lending Practices (SLOOS), banks reported tight-
ening standards and terms on C&I loans to firms of all
sizes in the third quarter. The most frequently cited rea-
sons for tightening C&I standards and terms included
concerns about the economic outlook, a less favorable
or more uncertain economic outlook, and the effects of
potential legislative changes, supervisory actions, or
changes in accounting standards. Banks also reported
that demand for C&I loans weakened in the third quar-
ter, with the most frequently cited reasons being de-
creased investment in plant or equipment and decreased
inventory financing needs. Similarly, banks indicated
that commercial real estate (CRE) loan standards contin-
ued to tighten and demand weakened further in the third
quarter.
Credit in the residential mortgage market remained easily
available for high-credit-score borrowers who met
standard conforming loan criteria. However, in the Oc-
tober SLOOS, banks reported tighter standards and
weaker demand for almost all categories of residential
real estate loans in the third quarter.
Consumer credit remained readily available for most
borrowers, although there were signs of tightening
standards. Credit card balances grew at a strong pace in
Page 5
August, while auto credit continued to grow at a modest
pace. However, respondents to the October SLOOS re-
ported tighter standards for all consumer loan categories
in the third quarter. Meanwhile, outstanding student
loan balances declined significantly in August, driven by
the cancellation of student loan debt for certain borrow-
ers.
The credit quality of businesses, households, and munic-
ipalities continued to show signs of deterioration in most
sectors, as delinquency rates rose. The credit quality of
nonfinancial firms borrowing in the corporate bond
market remained sound overall, albeit with pockets of
deterioration. The credit quality of C&I and CRE loans
on banks’ balance sheets remained generally stable
through August. However, delinquency rates for non-
farm nonresidential CRE loans recently picked up. In
the October SLOOS, banks frequently cited concerns
about credit quality, including for both C&I and
CRE loans, as reasons for tightening standards over the
third quarter.
The staff provided an update on its assessment of the
stability of the financial system and, on balance, judged
that the financial vulnerabilities of the U.S. financial sys-
tem were notable. The staff characterized asset valua-
tion pressures as notable. In particular, the staff noted
that valuations in equities, housing, and CRE were high.
The forward price-to-earnings ratio for S&P 500 firms
increased to the upper quartile of its historical distribu-
tion. House prices increased to the upper end of their
historical range, relative to fundamentals, despite tight
credit conditions in the mortgage market. While CRE
prices declined, valuations remained stretched, with cap-
italization rates remaining near historical lows. Funda-
mentals in the office sector remained weak given the
shift toward telework in many industries, especially for
central business districts and coastal cities. Delinquency
rates on commercial mortgage-backed securities moved
up as office and retail loan performance deteriorated.
Vulnerabilities associated with business and household
debt were characterized as moderate.
Leverage in the financial sector was characterized as no-
table. In the banking sector, holdings of liquid assets
remained high, and regulatory risk-based capital ratios
indicated ample loss-bearing capacity in the banking sys-
tem. However, the fair value of banks’ longer-term
fixed-rate assets, including loans, decreased in the third
quarter as longer-term interest rates rose. Hedge fund
leverage remained above historical averages, particularly
for the largest funds. Funding risks were also character-
ized as notable. Reliance on uninsured deposits declined
_____________________________________________________________________________________________
Page 6 Federal Open Market Committee
in the aggregate but remained high for some banks, and
short-term nondeposit funding had increased.
Staff Economic Outlook
The economic forecast prepared by the staff for the Oc-
tober–November meeting was similar to the September
projection. The staff expected fourth-quarter GDP
growth to slow markedly from its third-quarter rate. All
told, however, average GDP growth over the second
half of the year was projected to be a little faster than the
first half’s pace. The staff also expected output in the
fourth quarter to be temporarily restrained by the auto-
workers’ strike before being boosted in the first quarter
as lost production begins to be made up. The size and
timing of these effects were highly uncertain, however.
With the lagged effects of monetary policy actions ex-
pected to restrain activity, real GDP was projected to rise
more slowly than the staff’s estimate of potential over
the next two years before rising in line with potential in
2026. The unemployment rate was expected to be
roughly flat through 2026 as the effects of below-poten-
tial output growth were offset by the effects of further
improvements in labor market functioning.
Total PCE price inflation was expected to be close to
3.0 percent by the end of this year, and core PCE infla-
tion was expected to be around 3.5 percent. Inflation
was projected to move lower in coming years as demand
and supply in product and labor markets moved into
better alignment; in 2026, total and core PCE price in-
flation rates were expected to be close to 2 percent.
The staff continued to view the uncertainty around the
baseline projection as elevated. Risks around the infla-
tion forecast were seen as skewed to the upside, given
the possibility that inflation might prove to be more per-
sistent than expected or that additional adverse shocks
to supply conditions might occur. The risks to the fore-
cast for real activity were viewed to be skewed to the
downside. Moreover, the additional monetary policy
tightening that would be necessitated by higher or more
persistent inflation, and the potential for a greater tight-
ening of financial conditions, represented a downside
risk to the projection for real activity.
Participants’ Views on Current Conditions and the
Economic Outlook
Participants noted that real GDP had expanded at an un-
expectedly strong pace in the third quarter, boosted by a
surge in consumer spending. Nevertheless, participants
judged that aggregate demand and aggregate supply con-
tinued to come into better balance, as a result of the cur-
rent restrictive stance of monetary policy and the con-
tinued normalization of aggregate supply conditions.
Participants assessed that while labor market conditions
remained tight, they had eased since earlier in the year,
partly as a result of recent increases in labor supply. Par-
ticipants judged that the current stance of monetary pol-
icy was restrictive and was putting downward pressure
on economic activity and inflation. In addition, they
noted that financial conditions had tightened signifi-
cantly in recent months. Participants noted that inflation
had moderated over the past year but stressed that cur-
rent inflation remained unacceptably high and well
above the Committee’s longer-run goal of 2 percent.
They also stressed that further evidence would be re-
quired for them to be confident that inflation was clearly
on a path to the Committee’s 2 percent objective. Par-
ticipants continued to view a period of below-potential
growth in real GDP and some further softening in labor
market conditions as likely to be needed to reduce infla-
tion pressures sufficiently to return inflation to 2 percent
over time.
In their discussion of the household sector, participants
observed that the incoming data on consumer spending
had again surprised to the upside, likely supported by a
strong labor market and by generally solid household
balance sheets. Nevertheless, some participants re-
marked that the finances of some households—espe-
cially those in the low- and moderate-income catego-
ries—were increasingly coming under pressure amid
high prices for food and other essentials as well as tight
credit conditions. Several participants added that delin-
quencies on auto loans and credit cards had risen for
these households. Some participants commented that
their District contacts reported a somewhat weaker pic-
ture of consumer demand than indicated by the incom-
ing aggregate data. Several participants, however, noted
that repeated upside surprises in the aggregate spending
data could indicate that considerable momentum could
be sustained. A couple of these participants commented
that the aggregate household sector may have more fi-
nancial resources than previously thought, which could
help account for the strength in spending. A few partic-
ipants observed that activity in the housing sector had
flattened out in recent months, likely reflecting the ef-
fects of further increases in mortgage rates from already
elevated levels.
Business fixed investment was flat in the third quarter,
and participants observed that conditions reported by
their business contacts varied across industries and Dis-
tricts. Some participants noted that businesses were
benefiting from an increased ability to hire and retain
workers, better-functioning supply chains, or reduced
input cost pressures. A few participants commented
_____________________________________________________________________________________________
Minutes of the Meeting of October 31–November 1, 2023
that their business contacts had reported that cost in-
creases could not be easily passed on to customers. Sev-
eral participants commented that the apparent resolu-
tion of the United Auto Workers strike would reduce
business-sector uncertainty. Several participants noted
that an increasing number of District businesses were re-
porting that higher interest rates were affecting their
businesses or that firms were increasingly cutting or de-
laying their investment plans because of higher borrow-
ing costs and tighter bank lending conditions. A few
participants noted that the tighter financial and credit
conditions could be particularly challenging for small
businesses. A few participants observed that higher in-
terest rates were also affecting the agricultural sector,
with their contacts noting that high financing costs were
likely weighing on purchases of heavy agricultural equip-
ment. Regarding the energy sector, a few participants
observed that energy markets had calmed after signifi-
cant volatility at the start of the current armed conflict
between Israel and Hamas.
Participants observed that the labor market remained
tight. Payroll growth was unexpectedly strong in Sep-
tember, and the unemployment rate remained low. Nev-
ertheless, participants assessed that labor supply and la-
bor demand were continuing to come into better bal-
ance. Measures of labor supply had moved up, with the
labor force participation rate for prime-age workers ris-
ing this year, especially for women, and immigration also
boosting labor supply. A few participants expressed
concern that the recent pace of increases in labor supply
might not be sustainable in light of challenges regarding
the availability of childcare and the uncertainty regarding
the extent to which immigration would continue to
boost the growth of labor supply. Regarding labor de-
mand, various measures appeared to indicate some eas-
ing, including a downward trend in job openings, a lower
quits rate, and reduced wage premiums offered to job
switchers. Consistent with the gradual rebalancing of la-
bor market conditions, participants commented that the
pace of nominal wage increases had continued to mod-
erate. A few participants noted, however, that nominal
wages were still rising at rates above levels generally as-
sessed to be consistent with the sustained achievement
of the Committee’s 2 percent inflation objective, given
current estimates of trend productivity growth.
Participants observed that inflation had continued to
moderate since the middle of last year. Both the 6- and
12-month change measures of core PCE price inflation
had come down somewhat in recent months, despite a
less favorable monthly reading in September. Partici-
pants pointed to the softening of core goods prices in
Page 7
recent months, as well as the continued gradual decline
in housing services inflation. However, participants also
noted that there had been only limited progress in bring-
ing down inflation in core services excluding housing.
Participants noted that longer-term inflation expecta-
tions remained well anchored. Participants observed
that, notwithstanding the moderation of inflation so far,
inflation remained well above the Committee’s 2 percent
longer-run objective and that elevated inflation was con-
tinuing to harm businesses and households, particularly
low-income households. Participants stressed that they
would need to see more data indicating that inflation
pressures were abating to be more confident that infla-
tion was on course to return to 2 percent over time.
Participants noted that in recent months, financial con-
ditions had tightened significantly because of a substan-
tial run-up in longer-term Treasury yields, among other
factors. Higher Treasury yields contributed to an in-
crease in 30-year mortgage rates to levels not seen in
many years and led to higher corporate borrowing rates.
Many participants observed that a range of measures
suggested that the rise in longer-term yields had been
driven primarily or substantially by a rise in the term pre-
miums on Treasury securities. Participants generally
viewed factors such as a fiscal outlook that suggested
greater future supply of Treasury securities than previ-
ously thought and increased uncertainty about the eco-
nomic and policy outlooks as likely having contributed
to the rise in the term premiums. Some participants
noted that the rise in longer-term yields may also have
been driven by expectations for a higher path of the fed-
eral funds rate in light of the surprising resilience of the
economy or a possible rise in the neutral policy rate. Par-
ticipants highlighted that longer-term yields could be
volatile and that the factors behind the recent increase,
as well as their persistence, were uncertain. However,
they also noted that, whatever the source of the rise in
longer-term yields, persistent changes in financial condi-
tions could have implications for the path of monetary
policy and that it would therefore be important to con-
tinue to monitor market developments closely.
Participants generally noted a high degree of uncertainty
surrounding the economic outlook. As upside risks to
economic activity, participants noted that the factors be-
hind the resilience in spending could persist longer than
expected. As downside risks, participants cited the pos-
sibility that the effects on households and businesses of
the cumulative policy tightening and tighter financial
conditions could be larger than expected, disruptions
from a potential government shutdown, and the possi-
bility that the resumption of student loan repayments
_____________________________________________________________________________________________
Page 8 Federal Open Market Committee
could weigh on household spending by more than was
expected. As upside risks to inflation, participants cited
the possibility that progress on disinflation stalls or in-
flation reaccelerates because of continued momentum in
economic activity. A potential for a broadening of the
armed conflict in the Middle East was seen as presenting
upside risk to inflation through its potential effect on oil
prices as well as downside risk to economic activity.
In their discussion of financial stability, participants ob-
served that the banking system was sound and resilient
and that banking stresses had subsided. However, many
participants commented that unrealized losses on assets
resulting from the rise in longer-term interest rates, sig-
nificant reliance by some banks on uninsured deposits,
and increased funding costs at banks warranted moni-
toring. Many participants also commented on risks as-
sociated with a potential sharp decline in CRE valua-
tions, which could adversely affect some banks and
other financial institutions. Several participants noted
potential cyber risks and emphasized the importance of
firms, particularly providers of critical infrastructure, be-
ing prepared to recover from such threats. A few par-
ticipants also discussed the importance of monitoring
Treasury market functioning and potential vulnerabili-
ties posed by the amount of leverage being used by
hedge funds in this market. In addition, several partici-
pants emphasized the need for banks to establish readi-
ness to use Federal Reserve liquidity facilities and for the
Federal Reserve to ensure its own readiness to provide
liquidity during periods of stress.
In their consideration of appropriate monetary policy ac-
tions at this meeting, participants noted that economic
activity expanded at a strong pace in the third quarter
and had been resilient. While the labor market remained
tight, job gains had moderated, on balance, since earlier
in the year, and there were continuing signs that supply
and demand in the labor market were coming into better
balance. While inflation had moderated since the middle
of last year, it remained well above the Committee’s
longer-run goal of 2 percent, and participants remained
resolute in their commitment to bring inflation down to
the Committee’s 2 percent objective. Participants also
noted that tighter financial and credit conditions facing
households and businesses would likely weigh on eco-
nomic activity, hiring, and inflation, although the extent
of these effects remained uncertain. Participants com-
mented on the significant tightening in financial condi-
tions in recent months, driven by higher longer-term
yields, with many noting that it was uncertain whether
this tightening of financial conditions would persist and
to what extent it reflected expectations for tighter policy
or other factors. Amid these economic conditions, all
participants judged it appropriate to maintain the target
range for the federal funds rate at 5¼ to 5½ percent at
this meeting. Participants judged that maintaining this
restrictive stance of policy at this meeting would support
further progress toward the Committee’s goals while al-
lowing more time to gather additional information to
evaluate this progress. All participants agreed that it was
appropriate to continue the process of reducing the Fed-
eral Reserve’s securities holdings, as described in the pre-
viously announced Plans for Reducing the Size of the
Federal Reserve’s Balance Sheet.
In discussing the policy outlook, participants continued
to judge that it was critical that the stance of monetary
policy be kept sufficiently restrictive to return inflation
to the Committee’s 2 percent objective over time. All
participants agreed that the Committee was in a position
to proceed carefully and that policy decisions at every
meeting would continue to be based on the totality of
incoming information and its implications for the eco-
nomic outlook as well as the balance of risks. Partici-
pants noted that further tightening of monetary policy
would be appropriate if incoming information indicated
that progress toward the Committee’s inflation objective
was insufficient. Participants expected that the data ar-
riving in coming months would help clarify the extent to
which the disinflation process was continuing, aggregate
demand was moderating in the face of tighter financial
and credit conditions, and labor markets were reaching
a better balance between demand and supply. Partici-
pants noted the importance of continuing to communi-
cate clearly about the Committee’s data-dependent ap-
proach and its firm commitment to bring inflation down
to 2 percent.
All participants judged that it would be appropriate for
policy to remain at a restrictive stance for some time un-
til inflation is clearly moving down sustainably toward
the Committee’s objective. Participants also observed
that the continuing process of reducing the size of the
Federal Reserve’s balance sheet was an important part of
the overall approach to achieving their macroeconomic
objectives. A few participants noted that the process of
balance sheet runoff could continue for some time, even
after the Committee begins to reduce the target range
for the federal funds rate. Several participants com-
mented on the recent decline in the use of the ON RRP
facility, noting that the use of the facility had been re-
sponsive to market conditions.
_____________________________________________________________________________________________
Minutes of the Meeting of October 31–November 1, 2023
Participants discussed several risk-management consid-
erations that could bear on future policy decisions. Par-
ticipants generally judged that, with the stance of mone-
tary policy in restrictive territory, risks to the achieve-
ment of the Committee’s goals had become more two
sided. But with inflation still well above the Committee’s
longer-run goal and the labor market remaining tight,
most participants continued to see upside risks to infla-
tion. These risks included the possibility that the imbal-
ance of aggregate demand and supply could persist
longer than expected and slow the progress on inflation,
geopolitical tensions and risks emanating from global oil
markets, the effects of a tight housing market on shelter
inflation, and the potential for more limited declines in
goods prices. Many participants commented that even
though economic activity had been resilient and the la-
bor market had continued to be strong, downside risks
to economic activity remained. Such risks included po-
tentially larger-than-expected effects of the tightening in
financial and credit conditions on aggregate demand and
on bank, business, and household balance sheets; con-
tinued weakness in the CRE sector; and potential disrup-
tions to global oil markets.
Committee Policy Actions
In their discussion of monetary policy for this meeting,
members agreed that economic activity had expanded at
a strong pace in the third quarter, job gains had moder-
ated since earlier in the year but remained strong, and
the unemployment rate had remained low. Inflation had
remained elevated.
Members concurred that the U.S. banking system was
sound and resilient. They also agreed that tighter finan-
cial and credit conditions for households and businesses
were likely to weigh on economic activity, hiring, and in-
flation but that the extent of these effects was uncertain.
Members agreed that they remained highly attentive to
inflation risks.
In support of the Committee’s objectives to achieve
maximum employment and inflation at the rate of 2 per-
cent over the longer run, members agreed to maintain
the target range for the federal funds rate at 5¼ to
5½ percent. They also agreed that they would continue
to assess additional information and its implications for
monetary policy. In determining the extent of additional
policy firming that may be appropriate to return inflation
to 2 percent over time, members concurred that they
would take into account the cumulative tightening of
monetary policy, the lags with which monetary policy af-
fects economic activity and inflation, and economic and
financial developments. In addition, members agreed to
Page 9
continue to reduce the Federal Reserve’s holdings of
Treasury securities and agency debt and mortgage-
backed securities, as described in its previously an-
nounced plans. All members affirmed that they are
strongly committed to returning inflation to their 2 per-
cent objective.
Members agreed that, in assessing the appropriate stance
of monetary policy, they would continue to monitor the
implications of incoming information for the economic
outlook. They would be prepared to adjust the stance of
monetary policy as appropriate if risks emerge that could
impede the attainment of the Committee’s goals. Mem-
bers also agreed that their assessments would take into
account a wide range of information, including readings
on labor market conditions, inflation pressures and in-
flation expectations, and financial and international de-
velopments.
At the conclusion of the discussion, the Committee
voted to direct the Federal Reserve Bank of New York,
until instructed otherwise, to execute transactions in the
System Open Market Account in accordance with the
following domestic policy directive, for release at
2:00 p.m.:
“Effective November 2, 2023, the Federal
Open Market Committee directs the Desk to:
• Undertake open market operations as nec-
essary to maintain the federal funds rate in
a target range of 5¼ to 5½ percent.
• Conduct standing overnight repurchase
agreement operations with a minimum bid
rate of 5.5 percent and with an aggregate
operation limit of $500 billion.
• Conduct standing overnight reverse repur-
chase agreement operations at an offering
rate of 5.3 percent and with a per-counter-
party limit of $160 billion per day.
• Roll over at auction the amount of principal
payments from the Federal Reserve’s hold-
ings of Treasury securities maturing in each
calendar month that exceeds a cap of
$60 billion per month. Redeem Treasury
coupon securities up to this monthly cap
and Treasury bills to the extent that coupon
principal payments are less than the
monthly cap.
• Reinvest into agency mortgage-backed se-
curities (MBS) the amount of principal pay-
ments from the Federal Reserve’s holdings
_____________________________________________________________________________________________
Page 10 Federal Open Market Committee
of agency debt and agency MBS received in
each calendar month that exceeds a cap of
$35 billion per month.
• Allow modest deviations from stated
amounts for reinvestments, if needed for
operational reasons.
• Engage in dollar roll and coupon swap
transactions as necessary to facilitate settle-
ment of the Federal Reserve’s agency MBS
transactions.”
The vote also encompassed approval of the statement
below for release at 2:00 p.m.:
“Recent indicators suggest that economic activ-
ity expanded at a strong pace in the third quar-
ter. Job gains have moderated since earlier in
the year but remain strong, and the unemploy-
ment rate has remained low. Inflation remains
elevated.
The U.S. banking system is sound and resilient.
Tighter financial and credit conditions for
households and businesses are likely to weigh
on economic activity, hiring, and inflation. The
extent of these effects remains uncertain. The
Committee remains highly attentive to inflation
risks.
The Committee seeks to achieve maximum em-
ployment and inflation at the rate of 2 percent
over the longer run. In support of these goals,
the Committee decided to maintain the target
range for the federal funds rate at 5¼ to
5½ percent. The Committee will continue to
assess additional information and its implica-
tions for monetary policy. In determining the
extent of additional policy firming that may be
appropriate to return inflation to 2 percent over
time, the Committee will take into account the
cumulative tightening of monetary policy, the
lags with which monetary policy affects eco-
nomic activity and inflation, and economic and
financial developments. In addition, the Com-
mittee will continue reducing its holdings of
Treasury securities and agency debt and agency
mortgage-backed securities, as described in its
previously announced plans. The Committee is
strongly committed to returning inflation to its
2 percent objective.
In assessing the appropriate stance of monetary
policy, the Committee will continue to monitor
the implications of incoming information for
the economic outlook. The Committee would
be prepared to adjust the stance of monetary
policy as appropriate if risks emerge that could
impede the attainment of the Committee’s
goals. The Committee’s assessments will take
into account a wide range of information, in-
cluding readings on labor market conditions, in-
flation pressures and inflation expectations, and
financial and international developments.”
Voting for this action: Jerome H. Powell, John C.
Williams, Michael S. Barr, Michelle W. Bowman, Lisa D.
Cook, Austan D. Goolsbee, Patrick Harker, Philip N.
Jefferson, Neel Kashkari, Adriana D. Kugler, Lorie K.
Logan, and Christopher J. Waller.
Voting against this action: None.
Consistent with the Committee’s decision to leave the
target range for the federal funds rate unchanged, the
Board of Governors of the Federal Reserve System
voted unanimously to maintain the interest rate paid on
reserve balances at 5.4 percent, effective Novem-
ber 2, 2023. The Board of Governors of the Federal Re-
serve System voted unanimously to approve the estab-
lishment of the primary credit rate at the existing level of
5.5 percent, effective November 2, 2023.
It was agreed that the next meeting of the Committee
would be held on Tuesday–Wednesday, December 12–
13, 2023. The meeting adjourned at 10:05 a.m. on No-
vember 1, 2023.
Notation Vote
By notation vote completed on October 10, 2023, the
Committee unanimously approved the minutes of the
Committee meeting held on September 19–20, 2023.
_______________________
Joshua Gallin
Secretary